Gold Inches Lower

In early trading gold was up $4.05 to $1,739.70 and silver was up $0.13 to $32.80, with the silver/gold ratio creeping up to 53.

What a strange trading pattern we see developing this week as European equity markets are flying on the news of progress on a bailout plan for Spain. The news sent the euro on a run against the dollar, which usually has an immediate and positive impact on gold prices, but not lately.

Gold prices have moved stubbornly lower, often in opposition to changes in currency valuations. Added to that the silver/gold ratio is moving back up for the first time this month. We were steady at 51 last week, now we’re up to 53 in a matter of days. So, what’s going on?

My guess is that the confidence in Europe is real this time and is triggering some money to shift away from defensive investments and toward what are called “risk on” investments. Investors are selling gold and moving some of that money into European equity markets.

Another factor is that some investors are diversifying their hard assets by ranging into other types of investments that are rightly called collectibles. Those are things like guns and ammo, stamps, watches, rare wines, art, farmland, rare coins and other assets that are of interest to collectors.

I’m not a big fan of collectibles because it’s so hard to put a value on what you’re getting. Sure, with coins you have guides like the Blue and Red books, but you also have to know how to grade coins and that assessment can be subjective. Stamp collecting is similar, though that tends to be a smaller core of active traders.

I tend to prefer gold and silver because it’s straightforward. A troy ounce of silver is one troy ounce whether it’s a J&M bullion bar or a $1.40 in face value junk silver coins. Do also keep in mind that there are 14.58 troy ounces to a pound, not 16. You’d be amazed how many people get confused on that point.

Like with equity investments, I do encourage you to explore other hard asset options. But also keep in mind that gold and silver have been prized as a medium of exchange as long as man has been scratching out notes on clay tablets dried in the sun. You can’t say the same about watches, art or wine.